ERCOT Analysis: June 12, 2020

Our Risk Management team is watching the ERCOT market closely due to several factors discussed below. Summer is here and it is the time to tread delicately. A few specific occurrences can have dramatic implications for years to come in this market.

Market Indicators

The graph below was used in the ERCOT Market Update Report on Tuesday, June 9th and best tells the story of this market.

  • The red arrows illustrate how ERCOT Houston Hub summer strip pricing jumped in August of 2019, specifically on August 13th and 15th.
  • These specific days represent the two $9000/MW peak pricing events that occurred in the market due to weather and lack of available generation on the grid.
  • These events have the potential to occur again in 2020, and could again have an upward rippling effect on futures prices.

 

  • ERCOT summer pricing had permanently shifted upwards due to these peak pricing events, until sentiments recently changed due to COVID-19.
  • The lower pricing we have seen since March is not anticipated to last, as we are already seeing the strips show upward movement due to the recent June heat wave.

ERCOT Houston hub non-summer, monthly futures prices are trading near the bottom of their five-year range.

 

As mentioned in the Bulls and Bears report of 6/11/20, natural gas fired generation has increased its share in ERCOT.

  • NYMEX Natural Gas Prices are still trading near all-time lows over the next 4 years, and ERCOT prices are reflecting this.

 

If you have any other questions at this time please feel free to reach out to a Choice Energy Management consultant.